www.talkcyprus.org

[Crash Test Dummy]

From i kind friends at http://www.buzzle.com/editorials/5-1-2005-69383.asp

Quote: The Gaurdian Newspaper

Cyprus and Malta, two former British colonies, set course at the weekend to adopt the euro by 2008 - days after Tony Blair ruled out UK membership until after 2010 at the very earliest.

The two island states and Latvia, which all joined the EU on May 1 last year, agreed to tough structural and economic reforms over the next two years as they joined the exchange rate mechanism - a prelude to full euro entry later this decade.

Ten new countries, including eight from eastern Europe, joined the EU a year ago and are expected to swell the eurozone to at least 22 members by 2010 if they meet the entry criteria.

These include a budget deficit of less than 3%, a debt-to-GDP ratio of 60% and inflation and interest rates close to those of the best performing economies in the eurozone. They must also keep their currencies within a plus or minus 15% band around a central parity rate against the euro.

Malta, which set its lira at a central rate of 0.429300 to the euro, promised to maintain this rate, while Latvia, which set its lats at 0.702804, said it would allow its currency to fluctuate by only plus or minus 1%. Cyprus, which set its pound at 0.585274, said it would observe the 15% plus or minus fluctuation.

All three said they would toughen their fiscal stance, cutting debt, containing wage growth and public spending, and would reduce inflation, which in Latvia's case is more than 6% against the eurozone's 2.1%.

Cypriot central bank governor Christodoulos Christodoulou told Reuters the authorities would raise the retirement age to improve the public finances while Malta said it could raise taxes and step up its privatisation programme. Latvia said it would act to cut its trade deficit and restrain domestic demand.


The EU has made cyprus prices rocket. i fear the euro will do the same.

[Dhavlos]

i agree, i dont think the euro is neccesarily a good thing for cyprus, there are discussions ive heard of countries pulling out of the euro(Germany). Not only that but the eurozone in not prospering (if at all) at levels of the UK or US etc..

and if there is a cyprus solution, the cost of implimenting it would need either masses of money from eurozone members, to prevent inflation/collapse or whatever, or the current cypriot pound, and then to join the eurozone once the currency has stabilised.

[brother]

Thats why the british are not joining the euro, they can see its a bit of a herring and also if the EU breaks up they will not have to go threw some big crises like others will.

[magikthrill]

brother wrote: Thats why the british are not joining the euro, they can see its a bit of a herring and also if the EU breaks up they will not have to go threw some big crises like others will.

if the EU ever breaks up it will probably be because of the UK.

anyway not sure how bad the Euro will be for CYprus seeing as the CYP is valued higher than the EUR.

[brother]

If it was upto me i would keep the cypriot pound and wait a long while before i joined the euro, with such a strong currency why would you want to let it go for that red herring called euro.

[cannedmoose]

The big problem for Cyprus vis-a-vis the Euro is that joining the Euro prevents individual states from adjusting their monetary policy to suit local conditions. As an economy heavily reliant on tourism and service industries, and also heavily reliant on imports of most goods, Cyprus is very susceptible to external shocks. The effect on the Cypriot tourist economy of the Gulf War in 1991 was huge and events such as terrorist attacks, natural disasters etc. make Cyprus extremely vulnerable to the loss of its major industry. Cyprus therefore, needs to be able to react flexibly to such incidents, a flexibility that the Euro could deny them. There are rules which allow individual countries to temporarily suspend the rules in the case of dire need, but this depends on the agreement of other members, some of whom might be competing with Cyprus for the tourist Euro... I'm therefore not convinced of the merits of being part of the single currency area for a country such as Cyprus.

[brother]

So you are roughly saying the same thing as me moosey, but can cyprus opt out of the eoru say for 5-10 years and then join or is it a now requirement set down by brussels.

[cannedmoose]

brother wrote: So you are roughly saying the same thing as me moosey, but can cyprus opt out of the eoru say for 5-10 years and then join or is it a now requirement set down by brussels.

Cyprus can remain outside the Euro as long as its government wishes to. Membership of the EU does not mean progression towards Euro membership, although those outside the Eurozone are increasingly looked at as on the periphery of the Union. IMO the Republic of Cyprus government is striving for it in order to try to be at the centre of the EU and use it for their own strategic purposes. Given that the vast majority of tourists that visit the island are British, currency conversion reasons don't really wash. Although many businessmen in Cyprus see advantages with the removal of currency risk.

Cyprus is aiming to join by 2007, but if the government fails to implement austerity measures and offloads some of the loss-making national industries, I think they'll have trouble meeting that deadline if the Maastricht criteria are the judge. Somehow, if they want to join in 2007, because of Cyprus' small size, I don't think the criteria will be applied too harshly.

[brother]

Hmmmm....not a good idea imo but will see the end result in the future.

[city]

Dhavlos wrote: ........ there are discussions ive heard of countries pulling out of the euro(Germany). Not only that but the eurozone in not prospering (if at all) at levels of the UK or US etc......

Well, I haven't heard of this and I doubt it very much. But what is definitely true is that Germany is struggling very much and does not generate enough growth. Therefore the unemployment rate is rising. So there is less people to spend money. ( just to say it in a few words)
Plus since we have the Euro prices have actually doubled whereas wages remained the same.

From my experience I would strongly suggest that Cyprus does not adopt the Euro, especially since its own currency is much stronger.

[brother]

Quote: From my experience I would strongly suggest that Cyprus does not adopt the Euro, especially since its own currency is much stronger.

Thats what i am saying, its a disaster in the making for Cyprus, remember we are only a small island with barely a million population.